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Ericsson may have to refund Rs 550 crore to Reliance Communications if insolvency proceedings revived: NCLAT

Ericsson may have to refund Rs 550 crore to Reliance Communications if insolvency proceedings revived: NCLAT

Ericsson may have to refund Rs 550 crore to Reliance Communications if insolvency proceedings revived: NCLAT

Karunjit Singh and Devina Sengupta

An observations by a two-member NCLAT bench, threatens to turn the clock back on Ericsson.

| ET Bureau | Apr 9, 2019, 11:38AM IST

NEW DELHI/MUMBAI: An appellate tribunal Monday said Swedish equipment maker Ericsson would have to refund the Rs 576 crore including interest it was paid back to Reliance Communications if the insolvency proceedings against the mobile phone operator are revived.

In February, the Anil Ambani-owned telco had approached the National Company Law Appellate Tribunal (NCLAT) to withdraw the appeal it had filed last year for a stay on an insolvency petition against the telco admitted by the National Company Law Tribunal (NCLT). NCLAT, on May 30, 2018, stayed the proceedings, subject to RCom paying Ericsson Rs 550 crore as a settlement amount.

"If we dismiss this appeal (against the admission of bankruptcy proceedings against RCom), then you (Ericsson) will have to pay back the money. Why should you (Ericsson) take the amount and the financial creditors suffer?" asked a two member bench led by Justice SJ Mukhopadhayay on Monday.

He noted that assets of RCom, weighed down by Rs 46,000 crore in debt, had not been sold in accordance with the terms of the agreement under which the insolvency proceedings were stayed. RCom was forced to scrap its wireless assets sale to Reliance Jio, owned by Anil’s elder brother Mukesh, following successive legal obstacles.

“We should dismiss this appeal and let the ‘insolvency’ proceedings go on,” the bench said.

The observations of the NCLAT bench, which will next hear the matter on April 30, threaten to turn the clock back on Ericsson which forced RCom to pay Rs 550 crore dues, plus interest, totalling Rs 576 crore, under threat of jail for the telco’s chairman Anil Ambani, following legal proceedings in the Supreme Court.

Facing a three-month jail term for contempt of the Supreme Court’s orders to pay Ericsson, Anil Ambani paid off Ericsson with help from his elder brother Mukesh.

Justice Mukhopadhayay on Monday said a dismissal of RCom’s appeal would mean the telco will be pushed back into insolvency and debt resolution under an appointed resolution professional, as per the previous NCLT order. This would mean financial creditors would get preference to get any funds from RCom, while an operational creditor like Ericsson would get pushed down the priority list. Thus, Ericsson will have to pay back the settlement amount of Rs 550 crore.

Lawyers present in court said that at this point, Ericsson pointed out that it had been paid by Rcom in compliance with order passed by SC in a contempt petition. Ericsson's representatives also said they had received their dues along with interest and wanted to withdraw the insolvency petition against the telco and that the case was being heard in Supreme Court.

"Ericsson was asked by the tribunal to place on record all those proceedings by way of affidavit which have taken place in SC post May 30 (2018) order passed by tribunal," said senior advocate Anil Kher, representing Ericsson. Ericsson has two weeks to file the details.

The genesis of this tussle was when Ericsson petitioned for RCom's bankruptcy in NCLT on Sept 8, 2017, over nonpayment of dues worth over Rs 1,500 crore. The court admitted the petition but RCom appealed against the order in the NCLAT, which stayed it and the settlement terms were chalked out.

The matter appeared to have been settled after 18 months when in March, RCom paid Ericsson.

The NCLAT on Monday was also slated to hear the case between the telecom department and RCom over spectrum dues. However, the matter has been adjourned for April 30. The operator had earlier defended its stance that since it is under a payment moratorium, the telco does not have to provide any dues and nor can any bank guarantees be invoked against it.

RCom has missed two tranches of spectrum dues — of Rs 21 crore and Rs 281 crore in March and April. Sources in telecom department had told ET earlier that they will wait for the NCLAT's orders before sending show cause notice on the latest spectrum payment default.

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